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A majority of Israel's publicly-traded biotechnology companies will be forced to halt their research and development activities in as little as two-and-a-half years if they do not alter their business strategies immediately, research company Dun & Bradstreet Israel warned on Sunday.
"In many cases, biotech companies are not doing sales, but only conducting research programs," said Reuven Kuvent, director-general of D&B Israel. "They don't focus enough on raising capital or attracting investors - things they must do if they intend to continue to be operational over the next few years."
The 37 biotechnology or pharmaceutical companies that are listed on the Tel Aviv Stock Exchange lost a combined NIS 330 million through the first half of 2007, dropping their total available cash reserves to NIS 1.35 billion, according to a D&B Israel survey. "The 37 companies require a total of NIS 260m. a year for development costs, meaning that if they don't focus more on raising capital, they will only be able to operate for another 2.5 years."
Not everyone, however, is concerned about the study, the first such survey examining the finances of companies in the biotech sector.
"This pattern of losing money is normal for our listed biotech companies," Kobi Abramov, head of the research department at the Tel Aviv Stock Exchange, told The Jerusalem Post. "Most of these companies are primarily engaged in research and development and until they are successful in bringing a product to the market, they will continue to spend more on developing products than they will take in."
While the study found that some biotech companies have already started to focus more on raising capital, many others must follow in order to survive.
"There are already a few companies that have established international partners to help with product development and also a number of companies who have been lining up customers in different world markets," said Ayelet Selder, senior economist at D&B Israel. "Other companies in the sector must replicate these successes in terms of securing large international investments."
XTL Biopharmaceuticals Ltd., a company engaged in the acquisition, development and commercialization of therapeutics for the treatment of neuropathic pain and hepatitis C, led biotech company losses over the first six months of 2007, according to D&B, recording losses of more than NIS 61m. over the first half. When XTL reported second-quarter results in August, it attributed the increased loss primarily to its development of Bicifadine for the treatment of neuropathic pain.
XTL was followed by BiolineRx, which lost NIS 35.5m., a development that does not concern CFO Yuri Shoshan, who does not expect to see any revenues until 2009 at the earliest.
"We are a drug development company and developing drugs costs money," Shoshan told the Post. "We have enough money in the bank to hit every one of our milestones over the next three years and we are excited about spending this money - if we were not spending the money, then there would be something to worry about."
Kamada came in next with losses of NIS 26.9m. followed by Compugen with losses of NIS 26.3m. and Biolight with 20m. in losses, according to the report.